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THE DISTRIBUTOR’S LINK
Roman Basi
Roman Basi is the President of The Center for Financial, Legal & Tax Planning, Inc. Roman
graduated from Milliken University obtaining a Bachelor’s of Science Degree with a minor
in Psychology. He earned an MBA from Southern Illinois University with an emphasis
in Accounting and recevied his JD degree from Southern Illinois University. Roman is a
licensed CPA as well as being a licensed attorney in Illinois, Missouri and Florida and is
in high demand for his expertise in financial, legal and tax matters. His areas of expertise
include mergers and acquisitions, contracts, real estate law, tax and estate planning.
RECENT DEVELOPMENTS AND GUIDELINES
FOR PPP LOANS FROM THE SBA
Over the course of the first half of October, the SBA
has released three new guidelines addressing some of the
most frequently asked questions regarding PPP loans. For
those of you that are unaware, PPP (Paycheck Protection
Program) loans were provided to small businesses as a
response to the economic losses due to COVID-related
shutdowns. PPP borrowers can qualify to have the loans
forgiven if the proceeds are used to pay certain eligible
costs. On August 8, 2020, the program stopped accepting
new applications even though almost $134 billion of
congressionally approved funds remained unspent. Now,
most businesses are focusing on applying for forgiveness,
which is all but guaranteed so long as 60% of the forgiven
amount was used for payroll purposes.
On October 5, 2020, the SBA announced new
guidance that described the procedures requiring a change
of ownership of an entity that has received PPP funds.
The SBA procedural notice, which was addressed to SBA
employers and PPP lenders, described when a change in
ownership has occurred and the duties of a PPP borrower
continue regardless of the ownership change. According to
the notice, a “change of ownership” occurs when one of
the following is true: 1) at least 20% of the common stock
or ownership interest of a PPP borrower is sold or otherwise
transferred; 2) the PPP borrower sells or otherwise
transfers at least 50% of its assets to be measured by
fair market value; or 3) a PPP borrower is merged with
another entity. Notwithstanding any ownership change,
the PPP borrower still remains responsible for performance
of all obligations under the PPP loan, certifications
associates with the PPP loan application, compliance with
all PPP requirements, PPP documentation, and providing
the required documentation to the SBA or lender upon
request. The SBA must be notified within five (5) days
CONTRIBUTOR ARTICLE
of any transaction by the PPP lender. The lender is also
required to continue submitting the monthly 1502 reports
until the PPP loan is fully satisfied.
On October 7, 2020, the SBA released guidance
clarifying the deferral period for PPP loan payments.
Prior to the passage of Paycheck Protection Program
Flexibility Act of 2020, the deferral period for PPP loan
payments was set at 6 months. However, the Flexibility
Act extended the deferral period for borrower payments of
principal, interest, and fees on all PPP loans to the date
that SBA remits the borrower’s loan forgiveness amount
to the lender (or, if the borrower does not apply for loan
forgiveness, 10 months after the end of the borrower’s
loan forgiveness covered period). Under the updated
guidance, PPP lenders are required to give immediate
effect to the statutory extension and must notify all
borrowers of the change.
On October 9, 2020, the SBA released an interim
final rule (IFR) that provided almost instant relief for
approximately 3.57 million businesses. If their PPP
loan was for $50,000 or less, businesses are exempt
from any reductions in forgiveness based on either:
reductions in full-time equivalent employees or reductions
in employee salaries or wages. Small businesses that fit
in this category may apply for forgiveness using SBA Form
3508S. The new rule speeds up the forgiveness process
for PPP borrowers of $50,000 or less because they will
not be required to perform potentially complicated FTE or
salary reduction calculations. Because most businesses
would hire an outside source to do this work, they are now
also more likely to save money on this portion as well.
Borrowers of $50,000 or less will still have to make some
certifications and provide documentation to the lender for
payroll and nonpayroll costs.
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